Microsoft has hired TV pro Nancy Tellem to head its new L.A. production studio.

SEPT. 18, 2012 • To date, Microsoft Entertainment has sourced most of its non-game content for Xbox Live from broadcast media sources. That’s changing though as the company has announced the launch of its own Microsoft TV production studio in Los Angeles. Tapped to lead the new facility is Nancy Tellem, who was president of the CBS Network Television Entertainment Group until 2009 where she oversaw program development, production, business affairs and operations. Since then she worked as special advisor to CBS chief executive Leslie Moonves exploring emerging media and technologies, new production models, strategic opportunities and content partnerships. In her new role,

Tellem will serve as entertainment and digital media president and report to Phil Spencer, corporate vice president of Microsoft Studios. The content studio is being built from the ground up and will entertain production of everything from long-form TV to short-form web content. Although Microsoft’s portfolio of game IP will be a source of inspiration, entertainment content produced at the new facility will be aimed at a broad range of demographics and genres. In an interview with Broadcasting & Cable, Spencer said there are already 40 million connected Xbox users who are already spending more than 80 hours a month with entertainment content on the platform, and that the company sees TV as a must have when considering partnerships with other content providers.

Impact: Nearly seven years after the Xbox360 was launched it is no secret that Microsoft has been in no hurry to invest in, and launch, a replacement console. The arrival of the Kinect motion input controller not only buoyed 360 hardware sales, it boosted them substantially at the very time in the console cycle that a system should see a decay in sales. In an environment where casual games on mobile platforms have grabbed the attention of consumers, and the growth of digital content distribution across all platforms is undeniable, the model of how a home console can thrive is radically changed from a decade ago. No doubt there will be a 360 replacement, yet we see the next Microsoft system mirroring Nintendo’s approach of gentle improvement in hardware specifications rather than robust increases in raw processing power.

In the launch of this new TV production studio we see a further affirmation of this new console model. Microsoft has come to the conclusion that entertainment content partnerships may not be enough to stand out from other competitors. It was one thing when Xbox Live had the exclusive console rights to Netflix streaming. And negotiating similar exclusive content relationships in the future will be far too expensive now that the digital genie is out of the bottle. Microsoft has the added burden of having to justify to its customers why Xbox Live Gold subscriptions are a necessary expense. In our view, it was only a matter of time before Microsoft initiated its own live action content creation arm, much the same way Amazon.com now has it own major book publishing division. As is always the case, the quality of programming that comes from its own studio will dictate whether Microsoft is successful with this play, but the strategy itself is a sound one.